The sale/leaseback of MGM Grand Las Vegas and Mandalay Bay, valued at $4.6 billion, was completed Friday. MGM Resorts International will continue to operate the two Las Vegas Strip Resorts under a lease agreement.
The transaction, which was announced a month ago, moved the ownership of the land and buildings associated with the two resorts into a new joint venture owned by two real estate investment trusts, MGM Growth Properties and New York-based Blackstone Real Estate Income Trust. MGM Resorts will pay $292 million annually in rent to the joint venture.
MGM Growth will control 50.1% of the company and Blackstone will own 49.9%. On Friday, it was also announced the Blackstone REIT has purchased approximately 4.9 million shares of MGM Growth stock at $30.67 per share.
Under the deal, MGM Resorts will sell the MGM Grand Las Vegas to the joint venture for $2.5 billion, which includes cash of $2.4 billion and $85 million in MGM Growth partnership units. In a statement, MGM Resorts valued the transaction at 15.75-times the rent it will pay to lease the property.
MGM Growth has owned Mandalay Bay since the REIT was formed in 2015 and leases the property to MGM Resorts.
MGM Growth entered into a separate agreement to pay $1.4 billion for MGM Resorts’ existing operating partnership units. The casino company has 24 months to redeem the units. MGM Resorts owns almost 70% of the REIT and once the units are redeemed, the stake will drop to 55%. MGM has stated its desire to reduce its ownership in MGM Growth.
REIT transaction: $4.6B sale/leaseback of two Strip properties operated by MGM Resorts closeshttps://t.co/mBRMmB8cIv @CDCNewswire $MGM $MGP
— Howard Stutz (@howardstutz) February 14, 2020
Following a similar sale/leaseback in October for Bellagio and the outright sale of Circus Circus Las Vegas, MGM Resorts said combined transactions provided the company with net proceeds of $8.2 billion. A portion of the profits was used to retire $3.1 billion of the company’s long-term debt, which now stands at $11.3 billion as of Dec. 31.
MGM Growth currently owns 13 properties that are leased back to MGM Resorts, including 11 on the Strip, MGM Northfield Park in Ohio and Empire Resort Casino in Yonkers, New York. The deal for MGM Grand and Mandalay Bay covers 9,743 rooms, nearly 3 million square feet of meeting space and some 300,000 square feet of casino space across 226 acres on the Strip.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
